Risks of the Green Energy Transition for U.S. Regulated Electric Utilities

With environmental issues now at the forefront of the U.S. government and regulators, the country's green energy transition is accelerating at a much faster pace compared with the past couple of years. According to the Environmental Protection Agency, the environmental risks for businesses include compliance risk, operational risk, financial risk, and reputation risk. Energy companies, namely U.S.-based electrical utilities, have taken positive steps, setting up budgets and implementing policies to deal with the environmental risks relevant to their operations. This commentary addresses two major potential credit risks for electric utilities undergoing the decarbonization process.